WTO Reform and the 12th Ministerial Conference – What is Likely on Dispute Settlement?



Terence P. Stewart | Current Thoughts on Trade

With the 12th WTO Ministerial Conference now set for June 12-15, 2022 in Geneva, the WTO Members have a limited amount of remaining time to achieve progress on pending matters and to decide how to move forward with WTO reform (and what such reform might cover). For many Members, the issue of dispute settlement — whether restoration of the Appellate Body through starting selecting new AB members or reform of the system — is an important component of any WTO reform agenda. Earlier this week on April 27, the Dispute Settlement Body held its monthly meeting. As has been true for several years, the agenda included the question of Appellate Body vacancies/appointments. WTO, Dispute Settlement Body, 27 April 2022, Proposed Agenda, WT/DSB/W/697 (Agenda item 3). While the WTO’s news release on the meeting is titled “Members commit to engagement on dispute settlement reform”, the summary of the discussion that followed sounds virtually identical to the summaries of dozens of prior Dispute Settlement Body meetings on the same topic. Compare WTO News Release, Members commit to engagement on dispute settlement reform. 

While Members will likely agree to include dispute settlement reform in any WTO reform agenda agreed to at the 12th Ministerial, the difference in positions reflected in the WTO news release among Members suggest a continued yawning gap between the needs of the United States and the positions of many other WTO Members.

Below is the summary of the discussion contained in the April 27, 2022 WTO News Release.

Appellate Body appointments

“Mexico, speaking on behalf of 123 members, introduced for the 53rd time the group’s proposal to start the selection processes for filling vacancies on the Appellate Body. The extensive number of members submitting the proposal reflects a common concern over the current situation in the Appellate Body which is seriously affecting the overall WTO dispute settlement system against the best interest of members, Mexico said for the group.

“The United States said that its longstanding concerns with WTO dispute settlement remain unaddressed, and that it does not support the proposed decision to commence the appointment of Appellate Body members. Many members share US concerns with the functioning of the system and its negative impact on the WTO’s negotiating and monitoring functions, it said

“The US added that it wants to be clear it supports WTO dispute settlement reform and that it is prepared for continued and deepened engagement with members on the basis that such discussions should aim to ensure that WTO dispute settlement reflects the real interests of members and not prejudge what a reformed system would look like.

“More than 20 delegations (including the European Union for its 27 members, Nigeria for the African Group and St Vincent and the Grenadines for the Organization of Eastern Caribbean States) took the floor to reiterate the importance of the WTO’s two-tiered dispute settlement system to the stability and predictability of the multilateral trading system. They called on all members to engage in constructive discussions in order to restore a fully functioning dispute settlement system, which some cited as a top priority for reform of the organization.

“For the 123 members, Mexico again came back to say the fact a member may have concerns about certain aspects of the functioning of the Appellate Body cannot serve as pretext to impair and disrupt the work of the Dispute Settlement Body (DSB) and dispute settlement in general, and that there was no legal justification for the current blocking of the selection processes, which is causing concrete nullification and impairment of rights for many members.

“The DSB chair, Ambassador Athaliah Lesiba Molokomme of Botswana, said she hoped members would be able to find a solution to this matter.”

The statement of the new Deputy U.S. Trade Representative in Geneva, Amb. Maria Pagán, is copied

Statement by Ambassador Maria Pagán

• “Thank you, Chair. This is my first DSB meeting since arriving in Geneva, and I am pleased to be here. The United States values the work of Members in the DSB, and I look forward to supporting you as Chair in this important body.”

• “Members are aware of the longstanding U.S. concerns with WTO dispute settlement. Those concerns remain unaddressed, and the United States does not support the proposed decision.”

• “But let me be clear: The United States supports WTO dispute settlement reform. Like Ambassador Tai, I have personally participated in various dispute settlement proceedings, and I can appreciate the benefits of a system that effectively meets the needs of Members”

• WTO dispute settlement currently fails in this regard – for many years it has not met the needs of Members, including the United States, for example, due to its complexity, delays, lack of transparency, and interpretive overreach. We know well that many Members share U.S. concerns with the functioning of the system and its negative impact on the WTO’s negotiating and monitoring functions.

• This fact underscores the importance of understanding better the interests of all Members, and not just ‘what does the United States want’. A true reform discussion should aim to ensure that WTO dispute settlement reflects the real interests of Members, and not prejudge what a reformed system would look like.

• My delegation has been, and will continue to be, hard at work meeting with Members to better understand the interests of all Members. This important first step provides us with the greatest chance of achieving durable, lasting reform. That is the goal of the United States and we are prepared for continued and deepened engagement with Members on that basis.”

The Biden Administration, like the Trump Administration, believes that the operation of the dispute settlement system is in need of significant reform. The Trump Administration characterized the challenge as getting Members to explore why the Appellate Body felt at liberty to disregard the clear limitations on its authority in the Dispute Settlement Understanding and why Members had not moved earlier to ensure the limited role for the Appellate Body was respected. The Trump Administration also expressed concern that the dispute settlement system was not permitting Members to address the massive distortions caused to the global trading system from state-directed economies such as China. The Trump Administration was also not committed to a two-tier review system in light of the problems with the Appellate Body.

The Biden Administration has expressed similar concerns although Amb. Pagán’s comments appear to change the focus from why did the Appellate Body view itself as permitted to deviate from its limited role to a review of what Members “real interests” are. It is unclear if the different language reflects a change in focus or just a rearticulation of the need to find reforms that will deliver a dispute settlement system that is limited to and achieves the objectives Members have articulated.

With the major efforts of the U.S. and EU to work together on a host of trade and non-trade issues under the Biden Administration’s time and knowing the importance the EU has always placed on reobtaining binding dispute settlement, it is clear that the U.S. will agree to have dispute settlement reform as part of the WTO reform agenda as in indicated by Amb. Pagán’s statement. That doesn’t mean there is an obvious path to reform or that a two year time period (to the 13th Ministerial Conference) in the current circumstances will permit reform in all areas needing to be addressed. Nor is there any indication that Members are willing to consider corrections to the errant Appellate Body decisions to restore right. Members had when the WTO was launched.

But at a time where the ability of the WTO Members to deliver meaningful outcomes is even more limited than usual because of the Russian war in Ukraine, agreeing on an agenda for WTO reform topics may hold out the best hope for achieving a promise of a better future for Members at the upcoming 12th Ministerial.

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